MSP Growing Pains
You've built a nice little MSP business and you're starting to see your hard work pay off as it becomes more successful. But every silver lining has a cloud, and even success - especially if it comes quickly - can bring problems and hard decisions as you look at when, how and even whether to expand to accommodate new customer demand.
You might have started your business with only a handful of employees, but if you provide reliable technical services accompanied by excellent customer service, word-of-mouth advertising could do the job and you may see your business grow more rapidly than you expected. That’s a good thing – but it can also be overwhelming, especially if you’ve had to scrape and scramble to get enough clients to pay the bills in the past. More business means more money, but it also usually means (unless you really overinvested to begin with) more expenses to buy more equipment and hire more personnel.
Anticipating growth and developing a plan for managing it is a crucial part of your long-term business strategy. Here are a few tips:
- Do your own outsourcing. The premise of your business is that you offer your customers a way to offload tasks, such as running web servers and mail servers, which are not their core competencies, so they can concentrate on those things that are. Take a look at your own business. Are you still doing things yourself, such as accounting and taxes, that could be outsourced to a company that specializes in that?
- Take advantage of new technology first. Personnel can be one of the highest costs to businesses. Not only do you have to consider the hourly or monthly salary you’ll pay a new employee, but also the cost of benefits (paid time off such as holidays and vacations, health insurance, etc.) and the “hidden” costs (social security taxes, worker’s compensation and unemployment insurance, additional office/working space, additional equipment to be used by the employee, etc.). Do you really need to hire more workers, or can you get more done by taking advantage of technological advances and automation? On the other hand:
- Don’t put off hiring new people if you really need them. If everyone in the company is overloaded with work, working longer and longer hours and still not getting everything done, and if you’ve already examined the technological solutions, don’t cause good employees to burn out under the stress. You’ll end up hiring anyway – and you’ll be hiring and training new people to take the place of experienced workers who already know their jobs. It’s time to bite the bullet and (in a careful and deliberate way) expand your workforce.
- Don’t develop delusions of grandeur. Here’s where “slow and deliberate” comes in, and not just in relation to hiring. When the money starts rolling in, it’s easy to think growth will continue at the same pace indefinitely. Don’t sink all of your new-found revenues into expansion. Don’t move to fancier new facilities unless you really can’t function adequately in your present location. Don’t go out and put all new servers or other equipment that’s not really needed. Put some of that money away into a contingency fund in case business flounders in the future. This is especially true if you have all or most of your growth eggs in one basket; that is, if your sudden success is due to acquiring one big new customer, realize that there is always the possibility of losing that account and all that extra income. Hope for the best, but prepare for the worst.
- Learn to say “no.” One of the most difficult things for a suddenly successful business to do is turn down new clients. It feels as if you’re throwing money away. But it’s vital that you be able to assess how much business your company is capable of handling and not try to take on too much, too quickly. Doing that is a recipe for disaster; you’ll spread your resources too thin and end up not only losing those new customers, but alienating your old, formerly satisfied ones as well. A corollary to this is not to try to be all things to all customers. Expanding your services offerings can be a great business growth plan – but only if it’s done as part of a well thought out strategy. Deciding to offer a new service you’d never considered because a new client wants it, and then scrambling to try to get up to speed on the technology, get the equipment you need, etc. in record time will, at best, completely stress you and your employees out. At worst, it could ruin your business’s reputation.
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